A Teachable Moment

While I am in the housing market, and it was that market that triggered the entire economic crises and is continuing to infect it, the rest of the failing economy can keep the housing market from recovering.

 

The housing market was caused, initially, by people getting loans for which they could not continue to pay unless the housing market continued a rapid, and unsustainable increase.

 

That was made MUCH worse by lenders packaging those toxic loans into larger packages to hide them and sell them to worldwide investors – so the first thing the $700 billion “bailout” was designed was to make good those bad packages to investors. If that was not done, the investors would stop future package buying. They had been defrauded by the lenders and if they were not made whole there would be hell to pay in the future.

 

Then the next hurdle was to stem the huge number of foreclosures, and that actually is being done. It won’t help the several hundred thousand who dumped their homes already, it will help those who are on the cusp in the future.

 

But no business – or government – put money aside for a rainy day. All governments and most businesses spent to their limit and there are no “rainy day funds” – so government will have to raise taxes on the few people who were prudent. They are the only ones with money!

 

Now credit card companies are in line for a loan, and car companies, and…

 

With credit card companies on the brink, some people are waiting for a credit card bailout – to let someone else pay for their dinners at Donavan’s, pay for their hotel stays in Kauai, pay for their…

 

There is no end to this insanity. The car companies, and the credit card companies need to declare bankruptcy so they can reorganize into a more rational and competitive enterprise. Otherwise, the non-competitive problems that cause these problems will be able to continue without change.

 

This is a great teaching moment. I hope we don’t let it pass.